SCF Briefing spoke to Amit Agarwal, head of open account trade products, Global Transaction Services, DBS Bank, about the growing interest in supplier finance across Asia – and how banks should react.
Interest in supply chain finance (SCF) across Asia is snowballing. Perhaps that should come as no surprise when average payment duration in the Asia Pacific region where 88% of invoices are typically paid late, according to research by Atradius.
There’s no doubt that more corporates are considering SCF as an option, both to support their supply chains and also to optimise their working capital.
Amit Agarwal, head of open account trade products at DBS Bank, sees two factors driving the increased interest in SCF across the region.
Firstly, the interest comes from multinational corporates who have seen SCF work well in other regions. “If you look at the larger corporates, from a CFO or a Treasurer perspective, supply chain finance is one of the more effective working capital solutions. Treasurers who have experienced this in Europe or America, share this information within their subsidiaries in Asia and push local treasuries to adopt supplier finance solutions,” says Agarwal.
The second is a ‘push’ factor originating from fintechs and marketplaces (newer entrants into the SCF market), he explains: “We do see a new wave of fintechs moving into Asia, where they are approaching corporates directly with solutions which are often smarter and swifter in implementation compared to some of the banks,”
For DBS, an established provider of trade and supply chain finance for Asian corporates and their subsidiaries across the globe, this pickup in interest in SCF presents an opportunity for growth – but also brings the challenge of greater competition from those newly-arrived fintechs.
At the recent 2018 SCF Forum Asia event in Singapore, newcomers such as TradeIX and established names such as C2FO were present for the first time alongside DBS, to share their different perspectives, and the 2019 Forum looks likely to see many more involved.
Agarwal’s view is that the fast-moving fintechs offer an opportunity for co-operation, just as much as competition.
Collaboration often goes further than merely being a funding provider. In its engagements with fintechs, DBS applies a process known as POC – Participate, Orchestrate, Co-Create – depending on the level, of collaboration required.
In some cases, DBS might participate as a funder, especially where the push for integration comes from a corporate client – while in others the Bank may orchestrate or co-create solutions with a fintech for servicing the corporates. DBS is already partnering with some fintechs, clients and trade players to co-create and integrate solutions into industry ecosystems. These are likely to be announced in the very near future.
As Agarwal puts it: “Gone are the days when we measure ourselves and compare our capabilities against other banks. We want to reach a stage where we can also measure ourselves against non-bank players such as Alibaba or PrimeRevenue, who are well established in this space.”
It’s a big ambition, but Agarwal points out that DBS is inculcating a start-up environment where there is freedom to think creatively, test new concepts and, if successful, bring them to its clients.
“This non-traditional way of working transfers to DBS’ corporate client interactions, “ he adds. “Today, DBS is spending more time on a customer journey approach – talking about business problems with multiple departments within our clients’ organisations, before co-creating digital solutions with technology customisation to solve these challenges.
“That’s a big advantage compared to any other bank or fintech that we compete with,” he adds.
The third annual SCF Forum Asia takes place at the National University of Singapore on 23rd May 2019